2008 Financial Crisis Essay

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The 2008 financial crisis is an interesting event in history, one which nearly caused global economic collapse as well as another Great Depression. Greed and abuse of cheap credit were the leading causes of what would eventually lead to this financial peril. The housing market was a huge factor in causing near economic collapse, as well as the sheer amount of people who were investing based on speculation. The aftermath following the crisis resulted in bankruptcy everywhere - no one was safe, as can be observed from the bankruptcy of Lehman Brothers and Chrysler. Unemployment rose - and it took government action to finally help stabilize the economy.
First, it’s important to explore the leading cause of the financial crisis, which was credit. …show more content…

Lehman Brothers was a firm that was founded in 1850 and survived many financial challenges over the years, such as the Great Depression. However, it was unable to escape the financial crisis of 2008 and filed for bankruptcy, with $639 billion in assets and $619 billion in debt. This made it the largest bankruptcy filing in history. Lehman was the fourth largest U.S. investment bank at the time of its collapse (“The collapse of Lehman Brothers: A case study,” 2017). The primary reason Lehman got itself into trouble was because of heavy investing in the subprime mortgage market. The months leading up to the bankruptcy had been tumultuous - within the first week of September 2008 Lehman’s stock plunged 77%. While this was bad, it wasn’t quite the end - however, on September 9th, 2008, when a Korea Development Bank didn’t take a stake in Lehman, that problems became insurmountable. News of the Koreans not taking a stake in Lehman caused another 45% drop in stock and now a 66% spike in credit-default swaps on the company’s debt. By this point in time, Lehman’s hedge fund clients pulled out, and creditors cut credit lines (“The collapse of Lehman Brothers: A case study,” 2017). This spelled the end for

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